This Week in ESG and Impact Investing

According to the Washington Post, "The Securities and Exchange Commission has referred its investigation of Goldman Sachs to the Justice Department for possible criminal prosecution, less than two weeks after filing a civil securities fraud case against the firm, according to a source familiar with the matter. The Wall Street Journal and Bloomberg News reported Thursday night that the U.S. Attorney's Office in Manhattan had followed up on the request and opened a criminal probe. The office declined to comment. It is very rare for the government to indict a firm, and the mere threat of criminal prosecution can destroy a company. A criminal investigation destroyed the infamous Wall Street firm Drexel Burnham Lambert in the 1980s even though the firm settled with authorities."

I attended part of Senator Carl Levin's Permanent Subcommittee on Investigations hearing concerning Goldman Sachs. Bottom line: they never laid a glove on them. As one report noted, "By day’s end, the investment bank’s market value had risen by $549 million." My comments follow. 1. When questioned about most matters, Goldman's CEO simply misdirected the questioner to an irrelevant portion of the inquiry. Specifically asked a direct question about the firm's short position (a position that benefits from a fall in prices, in this case, housing prices) in the mortgage market, the CEO referred to Goldman's 140 year history (this was a misdirection), and characterized the firm's position as a hedge (this was false). A key factor relates to relative position size. A $1 million dollar long position offset by a $1 million dollar short position is a hedge. A $1 million dollar long position offset by a $10 million dollar short position is a directional bet on the ma

According to the Washington Post, "The Securities and Exchange Commission filed charges Friday against Goldman Sachs, one of the most successful but vilified banks on Wall Street, for misleading and defrauding investors in selling a financial product based on subprime mortgages. In filing the civil suit against Goldman Sachs, the agency is targeting one of the banks that largely escaped the wreckage of the financial crisis and, with the help of various forms of government aid, emerged stronger." We believe this may be the first in a series of actions targeting Goldman. An examination of Goldman's transactions with AIG will probably reveal similar questionable practices. As we noted on July 9, 2009 , the US lost 53% supporting Goldman. As we noted on March 5, 2009 , Goldman was one of several firms accused of systematically cheating customers. And, finally, as noted on July 19, 2007 , "From an ethical standpoint, (Goldman) has repeatedly engaged in behavior that would